On the first of this month, the D.C. Court of Appeals issued, sua sponte, an order granting the owners of two secular, for-profit corporations temporary reprieve to challenge the validity of the PPACA provision which requires coverage of preventive care – including FDA-approved contraceptive drugs, devices and related services – with no cost sharing (Gilardi v. HHS, D.C. Cir., No. 13-5069, 11/1/13). The owners of the two closely-held companies in Gilardi adhere to the Catholic faith and, based on their religious beliefs, oppose contraception, sterilization, and abortion.

Given PPACA’s apparent requirement to provide coverage in contravention to their religious beliefs or, in the alternative, pay potentially significant penalties for failing to provide compliant coverage as required under PPACA, the owners and their two companies filed suit in district court. Their suit alleged the mandated coverage of contraceptive drugs, devices and services violated their rights under the Religious Freedom Restoration Act (RFRA), the Free Exercise Clause and the Free Speech Clause of the U.S. Constitution, and the Administrative Procedure Act.

The plaintiffs moved for a preliminary injunction, but the district court denied their motion finding that (1) the companies could not “exercise” religion and, thus, the plaintiff corporations could not demonstrate a substantial burden on religious exercise under RFRA; and (2) the burden on the owner’ religious beliefs was indirect. The plaintiffs timely filed an interlocutory appeal and moved for an injunction pending appeal. After having initially denied their motion, the D.C. Court of Appeals revisited this issue and modified its earlier ruling.

In a detailed opinion rejecting the reasoning of the Tenth Circuit Court of Appeals, as announced in Hobby Lobbyv. Sebelius (which held that a for-profit secular corporation may assert that the mandate violates its religious rights), the D.C. Court of Appeals found that current case law did not provide a basis upon which it could conclude that a secular organization is a “person” that can exercise religion or that a corporation could vindicate the rights of its owners. Therefore, the D.C Court of Appeals found that the plaintiff corporations had no basis for bringing a RFRA claim. However, the court stated that it did “understand the impulse” for an argument that a closely-held corporation could vindicate the rights of its owners, leaving open the potential for the court to find differently under a different set of facts.

The Court then considered the rights of the owners – existing independently of any right of their secular companies. The governing opinion found that the two owners were likely to succeed on the merits of their claim that the contraceptive mandate places a substantial burden on their own free exercise rights and, therefore, remanded the plaintiffs’ claim to the district court to have the court consider the other factors relevant in assessing whether the parties were entitled to a preliminary injunction. In reaching this decision, the Court recognized that the contraceptive mandate demands that owners of closely-held organizations, like the plaintiffs, “meaningfully approve and endorse the inclusion of contraceptive coverage in their companies’ employer provided plans, over whatever objections they may have… [which] is a cognizable burden on free exercise. And the burden becomes substantial because the government commands compliance by giving” the owner’s a choice between disregarding their beliefs or paying large penalties.

Given the growing Circuit Court split on these issues facing secular organizations with religious objections to the contraceptive mandate, the issue appears to be ripe for Supreme Court review.